Whether you are just starting out or you’re an established landlord, there comes a point in your business when you run into the question of a Rent Guarantor. If you have been in the letting business long enough, you have probably come across prospective tenants who didn’t seem quite up for keeping their promises. Be it students or someone fresh out of college; sometimes you just get a gut feeling that the potential tenant is not quite up for the tenancy in one way or another.
A landlord may want to seek a rent guarantor from the tenant if they feel that a tenant cannot be trusted to pay the rent.
So, when is the right time for you to ask for a rent guarantor?
How can a tenant find a rent guarantor?
What are the qualifications for a rent guarantor?
Yes, it’s natural for landlords and tenants alike to have multiple questions about a rent guarantor.
This is why the property development experts at Snippie have compiled all the questions and answers related to a rent guarantor so that the next time you face this you will know what to do.
How do you define a rent guarantor?
A rent guarantor can be anyone from a company to relatives who contractually agree to become a financial backup for a tenant in the event of their failure to pay the rent. This way the landlord can always fall back on a rent a guarantor if the tenant fails to or refuse to pay the monthly rent. For landlords, a rent guarantor is the most effective means of collecting arrears of rent. A rent guarantor is legally obliged to cover any rent defaults, however big or small.
Tenants often appoint their parents and close relatives as a rent guarantor.
Who is qualified to be a rent guarantor?
While there is no clearly defined rule to determine the credentials of rent guarantors, it’s mandatory for them to be a financially stable individual. The rent guarantor should be a resident of the United Kingdom who is wealthier and ideally has a bigger source of revenue than the tenant.
The rent guarantor will be subjected to a series of checks to ascertain that they have credentials to cover the arrears of rent. Also, there will be a credit check to determine whether the rent guarantor is financially able to take care of rent arrears in addition to their everyday living expenses.
These days, tenants can always look elsewhere if their parents or relatives aren’t willing to help them out. If you are tenant reading this, don’t worry, we discuss how to go about this in greater detail below.
Is a rent guarantor supposed to pay off rental default?
Whatever you do, it’s absolutely essential that you find a rent guarantor who acts responsibly. The individual should be clearly made aware of the risks involved. You may have heard stories about rent guarantors running away from legal obligation when they wake up one morning to learn they are responsible for paying off someone else’s rent arrears.
When in doubt about anything, immediately refer to the guarantor agreement. Usually, a guarantor contract may hold the guarantor liable for a host of conditions including:
- Numerous unpaid bills
- Any damages to the property
- Any legal expenses incurred by the landlord in the proceedings
It’s an awful idea to keep the rent guarantor in the dark about their responsibilities. Remember, once you have them sign up, they are under a legal obligation to comply with the terms of the agreement.
Of course, the guarantor should be allowed to have an open discussion with the landlord about the legal details of the contract.
Is there a right time for a landlord to approach a guarantor?
When a tenant starts falling behind on rent, a landlord can send out a rent demand letter to the guarantor. If this happens, make sure to send to guarantor the whole series of exchanges you had with the tenant over rent debts and other violations of the tenancy. If the tenant fails to pay, the debt will be shifted to the guarantor.
When you are a tenant looking for a guarantor
Not every tenant has what it takes to provide a qualified guarantor who can meet the requirements of the tenancy. But don’t worry, you have got various options.
Especially if you happened to be a student, you could get your college or some agency to serve as your legitimate rent guarantor. The same body is expected to negotiate the details of the contract with the landlord.
If you can afford the fees, agencies like UK rent guarantor, for instance, can serve as your legal rent guarantor. The fee may vary depending on the amount you will be paying for rent.
The Housing Hand is another agency that helps college students and professionals to find the tenancy of their choice, so worth checking out also.
There are also universities that provide guarantor solutions to students across the United Kingdom. Of course, students may have to meet criteria in order to be deemed eligible for the guarantor program. A student’s poor academic record or any money you owed to the institution could get in the way of obtaining a rent guarantor.
How much should your guarantor earn?
It all boils down to what a landlord may demand from the guarantor. However, on average a guarantor is required to show three times the amount a tenant pays for rent. Usually, presenting proof of income is a prerequisite for negotiating the agreement. Most landlords insist on having a UK resident with a great deal of savings. The stricter the landlords, the more the number of regulations a rent guarantor will be subjected to.
Types of checks performed on a guarantor
A guarantor will undergo the same level of a background check as a tenant. The comprehensive process will involve taking a credit check, tracking of employer checks and verifying the ownership of property.
What should a landlord do if a guarantor is not ready to pay the rent?
If the rent guarantor refuses to make the rent payment on behalf of the tenant, the landlord is legally entitled to take the issue to court.
As you may have read in our earlier blog, a rent guarantor operates within a fixed agreement, therefore the guarantor is required to pay the arrears in rent as long as the tenancy lasts.
What to do if the guarantor is unable to pay?
The guarantor is bound by the agreement to pay the arrears even if they lose their job or fall sick. If the guarantor dies or goes bankrupt, the landlord can still make a claim against their properties. Of course, all these situations will be determined by what is actually written in the guarantee agreement.
Just keep these little tips in your mind the next time you deal with a rent guarantor.
As well as providing lots of advice and tips for landlords, Snippie provides an easy-to-use, innovative app where landlords can list and advertise their properties at reasonable rates. Landlords all across the UK have benefited from the time and cost savings Snippie provides – check it out here.